Pimco's Gross: Treasury Investors to be Boiled Alive

Wednesday, 01 Jun 2011 12:42 PM

Pacific Investment Management Co.’s Bill Gross said investors in U.S. Treasurys are being lulled into a false sense of security by positive returns this year because yields aren’t high enough relative to inflation.

Gross, who oversees the world’s biggest bond fund, said bond investors face a similar fate as a frog that remains in a pot of water while the temperature is gradually increased until the amphibian is cooked.

Inflation erodes the value of the fixed payments of bonds over time.

“Much of the Treasury yield curve now rests in negative territory when compared with expected future inflation, and that should send our bond investors into a hopping funk,â€